"The Peoples Bank of China (PBoC) has been somewhat trapped by its own logic. By referencing offshore rates they have made three weaker fixes in the world before changing their minds on the third day," he said.
China's benchmark Shanghai Composite index closed down 6.1 percent, at its lowest level since August 7 on Tuesday. Among China's other indexes, the blue-chip CSI300 and the smaller Shenzhen Composite plummeted 6.2 and 6.6 percent, respectively. This latest slide in Chinese stocks sparked fears that the PBoC could devalue its currency against the U.S. dollar further.
Around a third of the investors surveyed by the bank were underweight EM stocks, more than during the China debt scare in March of last year and up from levels seen during collapse of Lehman brothers in 2008. At the same time, some two out of three asset managers reckon a Chinese recession is the number one "tail risk" to global markets.
"Investors are sending a clear message that they are positioned for lower growth in China and emerging markets," said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
"European stocks remain in favor – but investors like domestically focused names and are avoiding anything exposed to China or commodities," the group said.